Sunday, October 27, 2013

One of my favorite financial writers is Gretchen Morgenson. She writes a weekly column on the industry for the New York Times. Today she writes about the $13 billion fine the Justice Department is charging JP Morgan Chase, run by Jaimie Dimon. To me, the fine is nice, and a little bit of punishment, but I don't think it does much of anything to change the flawed incentive system that led to a crisis of greed and corruption that did so much damage to the U.S. and world economies, from which we are all still suffering (except for the super wealthy, of course).I guess there are those bemoaning that the fines were too harsh, but as Ms. Morgenson writes:"Nobody made them underwrite toxic loans, sell them to unwitting investors and misuse beleaguered borrowers." Personally, I would still like to see some jail time for the leaders of these pirate institutions. But, oh well.She points out the obvious, that the financial giants have gotten bigger, still have an intrinsic government guarantee of being bailed out for their sins that go awry, and have gained political influence as as result of the crisis that they created in 2008. I would add that in many ways, our democracy has been supplanted by an oligarchy led by the financial sharks fresh from their last kills.She reminds us that the financial institutions used to be controlled by the Glass-Steagall Act, which separated commercial and investment banking. And although it can be claimed that such a separation might not have prevented the 2008 financial meltdown, there was one very toxic effect of the repeal of that law - the institutions themselves grew exponentially in size and power and political influence. They became impregnable. They took over the government. For themselves. Not for the benefit of the economy. For their own pocketbooks. But isn't that the magic of capitalism? that when each of us operates in our own self interest the economy is guided by an invisible hand that ends up benefiting the economy itself and thus, in the long run, benefits the people in the economy? Well, yes, unless some become too powerful and disrupt the competition that is the heart of capitalism. Witness Teddy Roosevelt's trust busting of over a hundred years ago, which was needed to allow the proper functioning of capitalism.She cites a professor of entrepreneurship and finance at the University of Chicago:""When all the financial firms are the same and all large, then they are going to have the same interests and lobby in the same direction" Zingales said. If they have competing interests because they cannot all be in the same businesses, their lobbying power shrinks."Zingales' solution:"First, we must force these institutions to recapitalize more" he said. "But we must also find a more automatic trigger to force recapitalizations along the way."The automatic trigger empowers the regulators to take over the institutions if they don't recapitalize. That should get their attention.Finally, Zingales recommends changing antitrust rules to include taking into account the added political influence proposed mergers would have in addition to the effect the mergers would have on competition and economies of scale. He concludes:"These companies become so important politically to the state or country that it is hard to resist transforming their interests into the policy of the country."Unfortunately, it is not much of a stretch of the imagination to see that the policies of our country have been transformed into the interests of the financial giants for quite some time. Which would be fine, if the financial industry were focused on providing capital for capitalism, real capitalism, creating businesses and industries and jobs and economic growth. But, the financial industry seems to have been transformed into a zero sum game where those on the inside make fortunes and those on the outside just hope our portfolios and pensions aren't destroyed by the recklessness and greed of the sharks at the top.

Saturday, October 26, 2013

The great ex-quarterback, Brett Favre, says he's had scary losses of memory. Here is his quote:""I don't remember my daughter playing soccer, playing youth soccer, one summer. I don't remember that. ... This was pretty shocking to me. ... For the first time in 44 years, that put a little fear in me."I just watched the documentary "Frontline: League of Denial, the NFL's Concussion Crisis". It is very sobering. The first NFL player to have his brain sectioned during an autopsy was the Hall of Fame center for the Pittsburgh Steelers, Mike Webster. He played on the great teams that won four Super Bowls. He was nicknamed "Iron Mike." He was beloved. He was admired for his enormous courage. When he retired he stopped being himself. He could not complete sentences. He became distracted, violent, disturbed. He died at the age of fifty. His body was destroyed, and his mind was damaged - CTE (Chronic Traumatic Encephalopathy). A degenerative disease of the brain. Junior Seau also had CTE. He killed himself at the age of 43 by shooting himself in the heart with the demand that his brain be autopsied to discover if it had been damaged by football. It was. He had undergone dramatic personality changes. He ended the nightmare. The NFL paid $765 million to settle a concussion lawsuit brought by ex-players. The NFL is doing its best to pretend to protect the players and research brain injuries and to stress "clean" play in the sport. But the damage isn't a function of dirty play, it's a function of playing football, period. You can't play football without contact, and you can't have contact without concussions and sub-concussions. Super agent, Lee Steinburg recounted his time with quarterback Troy Aikman after Aikman was knocked unconscious in a big game. They were in his hospital room, lights very low because normal light was too painful for Aikman to bear. Aikman asked Lee where he was, why, who won the game, etc. Kind of disturbing to Steinburg to see the effects of the concussion. But, ten minutes later, Aikman asked the same series of questions, with no memory of having just asked them. And then again. And then again. For a few times. Pretty shocking. And now Brett Favre admits to his fears about the state of his brain.How many mothers and fathers will allow their sons to play this game which includes brain damage as an integral part of the game? How many people can enjoy watching it once they see it with new eyes, the eyes of looking for brain damage? I can't.

Wednesday, October 16, 2013

So, Mitch McConnell and Harry Reid of the Senate hashed out a deal and the government will re-open and the debt limit will be raised. The suicide wing of the Republican Party has been overcome, good news indeed, for the country, and for the Republican Party.

Hard to imagine how the Tea Party could have hurt itself more, other than actually to have caused a U S government default on paying its bills, which so many of them actually wanted to do. The Tea Party seems to me to be led by the Confederate Southern states, who seem to love "heroic lost causes", for example, Pickett's charge that lost the battle of Gettysburg, and the Civil War. I guess it makes them feel brave.

It looks to me like the Tea Party is a kind of a romanticized idealism of a lost civilization, the Confederacy, and are ever dedicated to the hope that The South Will Rise Again. Or, more to the point, they seem to be dedicated to a notion of Southern manhood. I have no idea why any of the rest of the country gets sucked into their long dead fantasies.

Sunday, October 13, 2013

George Friedman of Stratfor.com does a good job of going back the the political roots of the current government shutdown. He avoids taking sides as to the issues and focuses on the system that got us here. His basic point is that our parties are more extreme today because we are now selecting presidential candidates via a primary voting system rather than having party bosses vet candidates and choose them at the conventions. This is a very good point, to my mind.A few years back I saw an interview with the retired CBS news anchor, Walter Cronkite. He said that it used to be that the party bosses would get together in the proverbial smoke filled rooms and talk about who should run for president. Someone would mention a name and the rest would say, no way, that guy is a drunk, or that guy can't keep it in his pants, or that guy has a hair trigger temper and couldn't be trusted with the nuclear button, or that guy is a nut case fanatic who would alienate most of the country. So, they went through a process where they ended up choosing some pretty well vetted candidates. Then, the Viet Nam war happened, the 1968 Democratic Party convention blew up in violence in Chicago and the party bosses (Mayor Daley and retiring president LBJ) rigged the convention to take away the nomination from the liberal anti-war candidate, Eugene McCarthy, and gave the nomination to LBJ's Vice President, Hubert Humphrey. So, George McGovern changed all of that. He headed a commission that would undermine the ability of the bosses to work behind closed doors to manipulate the selection process, and to have the candidates chosen by the voters. So, the primaries became how candidates were selected. Sounded wonderful. Idealism at its finest. No more corrupt bosses imposing candidates on the public. Hoorah!So, what ended up happening? As Friedman points out, the primary system ends up automatically choosing the most ideologically pure and extreme candidates because most people are NOT ideological, they are absorbed in their lives. So, the people who select the nominees for both parties are the ideologically committed - those whose lives are centered around politics and ideology. They choose hard core ideologues for president, senate, representative, and state offices as well. They are the ones who vote in the primaries, which have a low turnout, and which normal people don't feel well enough informed about to cast votes.Look at the presidential candidates that showed up for the Democrats after McGovern's institution of the primary system: George McGovern, Jimmy Carter, Walter Mondale, and Michael Dukakis - pretty hard core liberals all. Not until 1988, twenty years after the McGovern change, did a more centrist candidate, Bill Clinton win the primary nomination process. Then they went back to pretty liberal candidates in Al Gore and John Kerry. How liberal Obama is is a question of hot dispute.This push toward extremism is even more pronounced in the House of Representatives and even the Senate. Today's politicians aren't worried as much about their opponents on the other side of the isle and they are from more extremist primary challengers in their own party. The Tea Party has become the natural consequence of the primaries system. We can certainly expect a left wing version of the Tea Party to be right around the corner, I am afraid.So, one of the big factors driving the polarization of today's politics is the primary system of choosing candidates and electing politicians. Gerrymandering adds considerably to the problem, where the parties assign districts so as to make safe seats for their parties, but underneath even that force for extremism is the primary system itself. I share George Friedman's dismay at not being able to propose a solution. We aren't going back to the party bosses, because today's politicians don't get their campaign money from them but through grass roots fundraisers and multibillionaire donors who are fervidly dedicated to single issues or other forms of extremist groupings of issues.My hope is that today's dysfunctional government situation will wake up enough normal people that they will pay attention, and will influence the primaries away from the take-no-prisoner-and-never-compromise-or-negotiate extremists and vote for men and women who are more interested in becoming actual politicians, i.e. people with principles and ideals who understand that the nature of governance is politics, which involves making deals to get the best that you can for your side and moving on to the next issue.

Friday, October 11, 2013

How does a political party destroy itself? One way is by causing so much pain in the country that no one will vote for them anymore (except the fanatical utopianists within the fevered ideological bubble, of course). The question now seems to me to be whether the Republican Party can save itself from the Tea Party fanatics before the fanatics create massive pain to the country. Shut the government down unless they get their way? Stop writing checks for about 30% of government obligations unless they get their way? In a democracy the way you get to get your way is to win elections. The minority doesnt get to force everyone else to give in to their demands by simply sabotaging the very operation of democracy itself.I have written for some time now that I think the Republicans are destroying themselves. I have been thinking that they would be so discredited in the eyes of the voting public that they would end up in a precipitous decline at the polls. But, I am starting to worry that the way that this may play out is that the fanatics are actually able to get their way and it will create a world wide financial catastrophe and depression. That would certainly end the Republican Party, but I hope it doesn't come to that. I hope that the Republican Party can marginalize the fanatics before they cause us all that much pain. Let the Tea Party destroy itself by having the Republican Party turn their back on them and get back to the business of doing what they are paid to do, i.e. govern, i.e. negotiate, i.e compromise.

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About Me

I am a boomer who has been both a left winger and a right winger and am seeking to add some soothing energy to the inflamed polarizations of today's rhetoric. However, in the age of extremist Republicanism I see the best way to soothe the waters is to oppose the inflammations from the Right, and the Left as needed.